TRADING SYMBOL: The Toronto Stock Exchange –
AW.UN
HIGHLIGHTS
- A&W reports another superb quarter
- Same store sales up 8.9% for the quarter
- Income up 12.8% for the quarter
- Distributions to be increased by 3.4%
VANCOUVER, July 21, 2015 /CNW/ - A&W Revenue Royalties
Income Fund (the Fund) and A&W Food Services of Canada Inc.
(A&W Food Services) reported today results for the second
quarter ended June 14, 2015.
The Fund will hold a conference call to discuss the results
on Tuesday, July 21, 2015 at
1:00 p.m. Pacific Time (4:00 p.m. Eastern Time). The call can be
accessed by dialling toll-free 1-800-505-9587 or (416) 204-9524
Passcode 9363339. A replay will be available until
July 28, 2015, by dialling toll-free
1-888-203-1112 or (647) 436-0148 Passcode 9363339.
A&W restaurants in the Royalty Pool posted another strong
quarter, with same store sales for the second quarter of 2015
growing by 8.9% over the same quarter of 2014. The continuing
strong same store sales growth, along with the sales from 24 net
new restaurants added to the Fund's Royalty Pool in January 2015, resulted in the Fund's sales and
royalty income in the quarter increasing by 12.8% over the same
quarter of the prior year. On a year to date basis, same
store sales growth is 9.0% as compared to last year. Sales
reported by restaurants in the Royalty Pool and royalty income
increased by 11.6% year to date.
Distributable cash per unit increased by 4.2¢ to 37.8¢ per unit
for the second quarter of 2015 compared to 33.6¢ per unit for the
same quarter of 2014. Year to date distributable cash per
unit increased by 5.2¢ to 65.4¢ per unit compared to 60.2¢ per unit
for 2014. The trailing four quarters payout ratio is
93.2%.
As a result of the strong performance of the Fund and the
underlying A&W restaurants, the Fund is pleased to announce
that it is increasing monthly cash distributions by 3.4%, from
11.7¢ per unit to 12.1¢ per unit beginning with the July 2015 distribution. On an annualized
basis this represents a distribution rate of $1.452 per unit. The July distribution of
12.1¢ per unit will be payable to unitholders of record on
August 15, 2015 and will be paid on
August 31, 2015.
"We are very pleased with our continued strong sales and
financial performance", said Paul
Hollands, President and CEO of A&W Food Services.
"Our results are especially noteworthy given our strong results
from the same quarter last year. Our strategy to reposition
and differentiate A&W as a "better burger" QSR restaurant
continues to be very well received by our guests. We are
pleased that our success can be passed on to the Fund's unitholders
in the form of increased distributions."
Beginning in 2013, A&W Food Services embarked on a journey
to source simple, great-tasting ingredients, farmed with
care. The journey began with the introduction of beef raised
without the use of hormones and steroids in 2013, and continued in
2014 with the launch of chicken raised without the use of
antibiotics and eggs from hens fed only a vegetarian diet without
animal by-products. In 2015, A&W Food Services introduced
organic and Fair Trade coffee. "We are proud to have raised
the bar when it comes to sourcing better ingredients," said
Hollands. "We are committed to continuing to bring this
quality to our guests."
Another major strategic initiative of A&W Food Services is
the extensive re-imaging program to modernize and enhance the
appeal of existing A&W restaurants. The new design has
been developed to create high visibility and instant recognition of
the Home of The Burger Family®. Over 50% of
A&W's existing restaurants have completed the re-image to the
new design and including the new restaurants which opened in the
new design, over 500 restaurants in the A&W chain now have the
new design.
A&W Food Services is continuing to grow the number of
restaurants across Canada,
concentrating its growth in Ontario and Quebec. Eight new A&W
restaurants have opened in 2015 year to date.
Financial
Highlights
|
|
|
|
|
(dollars in
thousands except per unit amounts)
|
Period
from
Mar 23, 2015
to
Jun 14, 2015
|
Period
from
Mar 24, 2014 to
Jun 15, 2014
|
Period
from
Jan 1, 2015 to
Jun 14, 2015
|
Period
from
Jan 1, 2014 to
Jun 15, 2014
|
Same store sales
growth(1)
|
+8.9%
|
+7.0%
|
+9.0%
|
+5.9%
|
Number of restaurants
in the Royalty Pool
|
814
|
790
|
814
|
790
|
Sales reported by the
restaurants in the Royalty Pool
|
$249,110
|
$220,867
|
$451,558
|
$404,451
|
Royalty
income
|
$7,474
|
$6,627
|
$13,547
|
$12,134
|
General and
administrative expenses
|
82
|
104
|
341
|
343
|
Net third party
interest expense
|
554
|
559
|
1,089
|
1,102
|
Current income
taxes
|
1,261
|
1,158
|
2,457
|
2,076
|
Total distributable
cash generated for distributions and
dividends(2)
|
$5,577
|
$4,806
|
$9,660
|
$8,613
|
Distributable
cash per equivalent unit (2015 – 14,781,656 units; 2014
– 14,319,708 units)(2)(3)
|
$0.378
|
$0.336
|
$0.654
|
$0.602
|
Distributions and
dividends declared per equivalent unit
|
$0.351
|
$0.351
|
$0.585
|
$0.585
|
Net
income(4)
|
$7,197
|
$4,153
|
$9,227
|
$6,593
|
Net income, excluding
non-cash items(4)
|
$5,577
|
$4,806
|
$9,660
|
$8,613
|
(1)
|
Same store sales
growth is not an earnings measure recognized by IFRS and therefore
may not be comparable to similar measures presented by other
issuers. This information is provided as it is a key driver
of growth in the Fund.
|
(2)
|
Distributable cash is
not an earnings measure recognized by IFRS and therefore may not be
comparable to similar measures presented by other issuers.
This information is provided as it identifies the amount of actual
cash available to pay distributions to unitholders and dividends to
A&W Food Services.
|
(3)
|
The number of
equivalent units and distributable cash per equivalent unit in 2015
includes the 92,390 LP units exchangeable for 184,780 common shares
of Trade Marks representing the remaining 20% of the consideration
for the January 5, 2015 adjustment to the Royalty Pool which is
held back until December 2015 when the actual annual sales are
reported by the new restaurants. The number of equivalent
units and distributable cash per equivalent unit in 2014 includes
the 210,490 LP units exchanged for 420,980 common shares of Trade
Marks representing the final consideration paid in December 2014
for the January 5, 2014 adjustment to the Royalty
Pool.
|
(4)
|
Net income in 2015
and 2014 includes non-cash gains or losses on interest rate swaps,
amortization of deferred financing fees and deferred income
taxes. These non-cash items have no impact on the Fund's
ability to pay distributions to unitholders. The Fund's net
income excluding these non-cash items is presented for information
purposes only.
|
The Fund's royalty income for the second quarter of 2015 was
$7,474,000 based on sales of
$249,110,000. This was an
increase of 12.8% from royalty income of $6,627,000 and sales of $220,867,000 for the second quarter of
2014. Year to date royalty income was $13,547,000 based on sales of $451,558,000. This was an increase of 11.6%
from royalty income of $12,134,000
and sales of $404,451,000 for 2014
year to date. The increase in sales and royalty income was
due to the same store sales growth of 8.9% for the quarter and 9.0%
year to date as compared to 2014, and from the additional sales
from the 24 net new A&W restaurants added to the Royalty Pool
on January 5, 2015.
The amount of cash generated by the Fund in the quarter for
distributions and dividends increased by 16.0% to $5,577,000. Distributable cash per unit
increased by 4.2¢ to 37.8¢ per unit compared to 33.6¢ per unit for
the same quarter of 2014. The amount of distributable cash
generated by the Fund in the year to date period increased by 12.2%
to $9,660,000. Distributable
cash per unit increased by 5.2¢ to 65.4¢ per unit compared to 60.2¢
per unit for 2014 year to date.
Three monthly distributions totaling 35.1¢ per unit were
declared in the second quarter of 2015, the same as 2014.
2015 year to date distributions were 58.5¢ per unit, the same as
2014. The payout ratio dropped from 96.3% for the second
quarter of 2014 to 85.4% for the second quarter of 2015. The
year to date payout ratio decreased from 106.1% for 2014 year to
date to 97.1% for 2015 year to date. The trailing four quarters
payout ratio is
93.2%.
The Fund's net income for the second quarter of 2015 was
$7,197,000 compared to $4,153,000 for the second quarter of 2014.
Year to date net income was $9,227,000 compared to $6,593,000 for the prior year. Net income
in both years includes non-cash gains and losses on interest rate
swaps, amortization of deferred financing fees and deferred income
taxes. These non-cash items have no impact on the Fund's
ability to pay distributions to unitholders. Of more interest
to unitholders is the distributable cash calculation which
identifies the amount of actual cash available to pay distributions
to unitholders and dividends to A&W Food Services. As
noted above, distributable cash increased by 16.0% for the quarter
and 12.2% year to date and the Fund has a cumulative surplus of
distributable cash on hand of $2,704,000.
About the Fund
The Fund is a limited purpose trust
established to invest in Trade Marks, which through its interest in
A&W Trade Marks Limited Partnership (the Partnership), owns the
A&W trade-marks used in the A&W quick service restaurant
business in Canada. The A&W trade-marks comprise some of
the best-known brand names in the Canadian foodservice
industry. In return for licensing A&W Food Services to
use its trade-marks, Trade Marks (through the Partnership) receives
royalties equal to 3% of the sales of A&W restaurants in
the Royalty Pool. A&W is the second largest quick-service
hamburger restaurant chain in Canada. Operating
coast-to-coast, A&W restaurants feature famous trade-marked
menu items such as The Burger Family®, Chubby
Chicken® and A&W Root Beer®.
The Royalty Pool is adjusted annually to reflect sales from new
A&W restaurants, net of the sales of any A&W restaurants
that have permanently closed. Additional limited partnership
units (LP units) are issued to A&W Food Services to reflect the
annual adjustment. A&W Food Services' additional LP units
are exchanged for additional shares of Trade Marks which are
exchangeable for units of the Fund. A&W Food Services
owns 17.4% of the common shares of Trade Marks, and therefore owns
the equivalent of 17.4% of the units of the Fund on a fully-diluted
basis.
Trade Marks' dividends to A&W Food Services and the Fund,
and the Fund's distributions to unitholders are based on top-line
revenues of the A&W restaurants in the Royalty Pool, less
interest, general and administrative expenses and current income
taxes of Trade Marks, and are thereby isolated from many of the
factors that impact an operating business.
Follow A&W on Facebook (www.facebook.com/AWCanada) and
Twitter @AWCanada or visit www.awincomefund.ca.
Certain statements in this press release may contain
forward-looking information within the meaning of applicable
securities laws in Canada
(forward-looking information). The words "anticipates", "believes",
"budgets", "could", "estimates", "expects", "forecasts", "intends",
"may", "might", "plans", "projects", "schedule", "should", "will",
"would" and similar expressions are often intended to identify
forward-looking information, although not all forward-looking
information contains these identifying words. The
forward-looking information is based on assumptions that management
considered reasonable at the time it was prepared. The
forward-looking information is subject to risks, uncertainties and
other factors that could cause actual results to differ materially
from the results anticipated by the forward-looking
information. The factors which could cause results to differ
from current expectations are described in the Fund's most recent
Management Discussion and Analysis under the heading "Risks and
Uncertainties" and the Fund's Annual Information Form under the
heading "Risk Factors", available on SEDAR at www.sedar.com.
SOURCE A&W Revenue Royalties Income Fund